8 Common Mistakes Rehabbing Houses

Frank Chen

Hi, this is Frank Chen with REIClub.com, the only site you need as a real estate investor. Today I've got a quick video on eight common mistakes made by investors when rehabbing houses.

Rehabbing Houses Mistake 1: Get Rich Quick Mentality

requires time and meticulous effort
can't rush the process for a quick payday
lots of pitfalls if you don't perform the necessary due diligence

Rehabbing Houses Mistake 2: Lack of research on rehab procedures — preparation before application (paint)

finding contractors in only 50%
how good is their work?
before giving them the job, start them on a smaller one and see how they do
Do they have a portfolio, or sample properties you could go look at?
Multiple quotes will give you a good idea of what needs to be done

Rehabbing Houses Mistake 3: Do All the Work yourself to save money

quality of workmanship
time investment vs. cost

Rehabbing Houses Mistake 4: Not enough funds – can't pay bills, holding costs

at least 90-120 days of holding costs
30-days is NOT enough
much consider other variables – utilities, property tax, insurance, mortgage, realtor fees at closing

Rehabbing Houses Mistake 5: Pay Too Much When You Buy

Emotions get in the way
Have to consider all the costs involved – repair estimates
Market condition and trends – showing growth? Rental or Sales market?
Quick Formula – Start with final selling price – subtract costs as needed – is the final number over or under the selling price?

Rehabbing Houses Mistake 6: Lack of Knowledge of Target Market — décor, rehab conditions, competition

Over or under-scoping a project
Not understanding the Keep It Simple rule
Focus on “wow” factors that actually sell the house

Rehabbing Houses Mistake 7: Spending Too much on Rehabs

Focus on areas that are not as important as the major renovations – bath, kitchen, bedrooms etc…
Expensive amenities, appliances, windows… etc…
Reserve a 10-15% buffer for misc costs and unplanned repairs
Multiple quotes and preparation will minimize your risk here

Rehabbing Houses Mistake 8: No Exit Strategy

What happens if the property doesn't sell?
never enter a project if you cannot afford any unforeseen holding costs
Its just as good to hold a property for cash flow than sell it for a loss
Rehabs – rental property is usually the best exit strategy after holding the property

Understand that things can and do go wrong in this business. Hopefully this video has helped you become more aware of the common mistakes investors make when they rehab houses. All these mistakes can be avoided, or the risk can be minimized simply by preparation. Ask questions, get multiple quotes and opinions, and trust your inner compass based on the FACTS and not emotions.

Again, this is Frank Chen with REIClub.com. Please take the time to leave your comments for this video below and please subscribe to our YouTube channel so you'll be automatically notified when we upload more quick video tips for you. Take care and good investing.